The financial and directors’ reporting obligations for an Australian Incorporated Proprietary Company are quite onerous and must be audited if filed with the Australian Securities and Investments Commission (“ASIC”) each year. Most small proprietary companies, however, are exempt from the obligation to prepare and file Chapter 2M (Corporations Act) financial and directors’ reports.
Generally, a foreign owned small proprietary company that fails to prepare and file annual financial and directors’ reports commits a breach of the Corporations Act. Directors of the company, including foreign directors, who fail to take all reasonable steps to comply with the reporting requirements will contravene the Act. That could lead to hefty fines and potentially, orders banning them from being directors or managers of Australian companies. If dishonesty is involved the directors could be guilty of a criminal offence.
Due to the onerous nature of complying with the Chapter 2M requirements ASIC has provided Class Order 98/98 that can provide a foreign owned small company with relief from the reporting and filing obligations.
The Class Order needs to be carefully explored to confirm the exemption can apply. Additionally there are some key documents that need to be executed and lodged and failure to complete the appropriate paperwork in a timely fashion can result in a breach of the Corporations Act.
It really is a case of crossing your t’s and dotting your i’s.
If these circumstances apply to you then we would strongly recommend seeking advice to review your obligations.
Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
